Economy

‘Regulation of non-Virginia tobacco can help government earn ₹30,000 cr more’

Our Bureau New Delhi | Updated on May 18, 2020

About 13 crore kg of tobacco worth Rs. 1,700 crore is lyling unsold as auctions have been put on hold

Tax all tobacco products uniformly, National Health Forum appeals to Centre

Regulation of non-Virginia tobacco can yield additional revenue up to ₹30,000 crore for the government, National Health Forum (NHF), a non-government organisation (NGO) working in the field of tobacco control, has said.

The non-Virginia tobacco is used to make chewing varieties of tobacco, hookah, gutkha, kiwam, gudaku, zarda and bidis. These constitute about 85 per cent of the tobacco grown in India. Most tobacco or tobacco-based products are not taxed properly. This is in contrast to Virginia tobacco-based products which are taxed at the highest rate of GST (28 per cent) plus cess.

“As per our estimates, a 30 per cent levy as a reverse charge levied upon and paid by the manufacturers and dealers of non-Virginia tobacco products will yield a revenue increment of around ₹30,000 crore,” NHF’s Managing Trustee Mandakini Sinh said in a letter to the Finance Ministry, with a copy to the Health Ministry.

Tax evasion

She added this will lead to a far wider net of taxation and all types of tobaccos will be uniformly brought into the tax net. Currently, all tobacco products made using non-Virginia tobacco (such as Burley tobacco) are in the unorganised sector and there is large-scale evasion of tax by manufacturers with scant regard for the tobacco control laws.

The forum appealed to the government for regulating the sale of non-Virginia tobacco by ensuring that it is processed through auction platforms, overseen by the Tobacco Board of India or via APMCs. Also, taxing the non-Virginia tobacco in a manner similar to Virginia tobacco on a per kg basis will have a double benefit; one, it will enhance revenue and, two, control the sale of the so far unregulated tobacco products in India.

Needed, proper regulation

Sinh said that non-Virginia tobacco-based products (chewing tobacco, gutkha, pan masala with tobacco, zarda and snuff) are extremely dangerous in the context of the Covid-19 pandemic, as they are spat out and not swallowed.

According to the NHF, regulating the sale and distribution of non-Virginia tobacco as it is being done forVirginia tobacco will lead to fair and uniform taxation of all tobacco products and benefit farmers (who are currently not paid for almost a year after the sale due to the price-setting power of the powerful middle man).

Published on May 18, 2020

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